Why Are New Property Owners Converting Their Units To Short-term Rentals In Dubai?

May 21, 2024
Why are landlords converting their property into a holiday home

Dubai has experienced a significant surge in short-term rentals, with the city’s Airbnb listings increasing to 25,000–30,000. The year 2024 alone has shown remarkable growth in this sector, suggesting continued opportunities for investors. However, understanding the market requires careful consideration, as it has been fully regulated since 2016 under a comprehensive legal framework, making it a viable income source for UAE nationals and expat property owners.

The Appeal of Short-Term Rentals in Dubai’s Market

Converting new properties into short-term rentals immediately upon purchase is becoming increasingly popular. Many clients are selling their properties to new investors who continue to leverage these homes as short-term rentals. This shift highlights the dynamic nature of Dubai’s real estate market, where short-term rentals are a major selling point.

Villas vs. Apartments: What’s More Profitable?

The profitability of short-term rentals in Dubai, both villas and apartments are in high demand. Families often prefer the privacy of a villa, while friends may opt for an apartment to enjoy the city life. This diversity in customer preferences underscores the robust demand across different property types.

Short-Term Rentals vs. Long-Term Rentals

Short-term rentals allow property owners to avoid long-term rental contracts, allowing them to adjust their strategies to meet current market needs. On average, short-term rentals yield about 20 percent higher returns than long-term leases over a two to five-year period.

Why are landlords converting their property into a holiday home
Why are landlords converting their property into a holiday home

Investment Insights for Short-Term Rentals and Holiday Homes in Dubai

The investment potential in Dubai is significant, especially following a record-breaking year in 2023 for tourism, which saw a 19% year-over-year increase in international tourists. The first quarter of 2024 also started strong, with over 5 million overnight visitors, an 11% increase from the previous year. The announcement of a new passenger terminal at Dubai World Central (DWC) is expected to further boost tourism and investment.

High Returns in Strategic Locations

While areas like Dubai Marina and Downtown Dubai offer the highest nightly rates, they do not always yield the best returns due to high property values. Instead, locations like Jumeirah Lake Towers (JLT) and Jumeirah Village Circle (JVC) have shown some of the highest returns on investment, finding deals in these areas has become more challenging as prices have risen.

New trends in short-term rental in the Dubai market include longer rental periods and a preference for working from holiday rentals, along with groups looking for larger units. Areas like Barsha South, Meydan, and Dubai Creek are expected to be key areas of development and interest in the coming year.

For those considering investing in short-term rentals or holiday homes in Dubai, it is crucial to understand the market thoroughly, identify clear investment objectives, and target the right demographic to ensure success. Doing your research and seeking professional advice can enhance the profitability and sustainability of your investment in the holiday home market. 

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